Do you want a lower rate for the first few years of your mortgage? Could you use some extra cash throughout your initial mortgage term? Are you planning on staying with your lender throughout your discount period?
If so, a discount mortgage might be the right mortgage for you.
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Discount mortgages offer you a discounted rate for typically the first 2-3 years of your mortgage term. You can get a discounted tracker mortgage or a discounted variable rate mortgage wherein the discount will be lower than the lender's standard variable rate (SVR).
What’s so great? What's so great? Since your repayments will be lower for the first 2-3 years of your mortgage, you can allocate that extra saving to spend money on things for your new home. For example, you might need new furniture or need to decorate the house. With lower initial repayments, you will have more cash available to set up your new home. You may also want to look at cashback mortgages and interest-only mortgages if you want some extra money for new household expenses.
Lower initial rates may also help if you are starting a new job but expect to have your salary increased in the next few years. Obviously this is a bit of a risk, but if all goes according to plan, your higher salary will leave you with more money to face the higher repayments when your discounted rate period ends. For another mortgage option if you are just starting off in your career, see graduate mortgages.
Possibly. After your discount period ends, lenders might charge you a higher rate for the rest of your mortgage term than if you just set up a lifetime tracker or variable-rate mortgage at the beginning of your mortgage term. You’ll also want to take fees into consideration since you’ll most likely want to remortgage when your discount period ends. Therefore, think about whether a discount period saves or wastes your money over the long term. A professional mortgage adviser will help you determine if discount rate mortgages are the most cost efficient option for you.
You will be tied in to the discount period of your mortgage since you will face high early redemption charges (ERCs) if you want to switch your mortgage. However, ERCs are usually lifted once your discount period ends.
You may be offered a “stepped” discount rate mortgage (that's a 'stepped' discount rate mortgage) in which your discount decreases over the term of your discount period.
You may also want to consider fixed rate mortgages (for the security of constant repayment amounts), variable rate mortgages or tracker mortgages (for potential repayment savings), and capped mortgages (a mixture of fixed rate and variable rate mortgage features).
Just fill in this short form and a mortgage adviser will contact you to answer all of your questions, give you discount mortgage advice, and get you on your way to buying your home.
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